It’s a well-known fact that it takes money to make money, especially when it comes to funding your own business. In today’s economic society, to get funding for your business, you’re forced to pull all kinds of tricks out of a hat and go way beyond the means of thinking outside the box… and the sad part about it is that you could be sitting on top of a multi-billion dollar idea but you just don’t have the upfront capital nor the sponsors to turn that idea into a reality.
Money is always the roadblock that keeps potential business owners from becoming business giants BUT money also isn’t a reason why you should give up on your business idea either, regardless of how many roadblocks you encounter… you’re always going to run into those in any economic climate. Now, there are definitely ways to effectively execute business funding, it just depends on a few factors:
- What type of business you have
- The amount of money you need
- What it will cost you to get the funding
Those factors are indeed going to determine whether or not you get the funding you need. But it’s also important to know that depending on how much capital you need upfront, you don’t have to stick with one source of funding either. In fact, Forbes magazine states that most small businesses get funding from multiple sources over time. So you don’t have to put all your eggs in one basket… one no can mean a couple of yeses from somewhere else.
Regardless of which road you take, it’s important to not be discouraged at any “no’s” you may get but more importantly, it’s important to know all the funding options you have, in case you run into some no’s. Take a look at some of the best funding options for small business success.
Tap into Your 401(k)
This idea may sound like pure craziness to lots of people but to a potential business owner with an idea of gold, tapping into their 401(k) for their business is the best investment to their retirement they could ever make. Typically, tapping into your 401(k) before hitting retirement age comes with some costly penalties but there are some tax code provisions that will allow you to bypass those financial penalties, you just have to make sure you’re taking the proper steps to do so.
If you are unsure how to go about tapping into your 401(k) without penalties, you’ll want to consult with an experienced professional who can help you set up a C corporation and help you find the right retirement plan to roll your retirement funds into. It’s very important that you are clear of the risks involved with this option because if your business goes under, you’ve not only lost your business… you’ve lost a nice nest egg as well.
Seek Sponsorship
When looking for funding for your business, it’s typically a one-way street… you need the money and someone or a financial entity gives it to you, and you pay the money back. But if you seek sponsorship, that means it’s a two-way street… in other words, “If I scratch your back, you’ll have to scratch mine.” Your sponsor will provide you with the funds you need and you will, in return, work out a compromise on how you will help your sponsor.
Wherever you go for sponsorship, you want to at least make sure they’re backed by a credible company, as a way to cover your back. Industry panelist and respected author Zac Barnett is the Cofounder of Fund Finance Partners, has mentioned (paraphrasing)
“FFP can improve efficiency and investor returns for fund sponsors by providing assistance with financing strategies.”
This is really one of the most important things to look at when seeking sponsorship. Why? Because if your sponsor invests in your company, then it’s another form of confirmation that your business has a successful future.
Obtain an SBA Loan
It’s well-known that banks are very particular on who they loan money to and because of that the Small Business Administration has become the go-to resource for small business owners. Now, that doesn’t mean that you will automatically get approved for an SBA loan… there are, of course, requirements and qualifications that you would need to meet; the bank is just more strict than the SBA. If you do meet the requirements and qualifications, you will then need to apply for a commercial loan from a financial institution that actually processes SBA loans; you have to do that because the SBA doesn’t directly give loans.
Ask Family and Friends
This is probably the hardest one out of all your financing options. It takes a lot to ask for help. Asking for help means you have to make yourself vulnerable and open yourself up to people that you otherwise wouldn’t. But, when you have a business idea that you truly believe in and know that it will be successful, sometimes you have to put your pride to the side and ask for help to achieve success. You have to remember that you don’t have to go it alone.
